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Financing Your MBA

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Director
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New post 18 May 2009, 13:39
refurb wrote:
msday wrote:
http://www.finaid.org/loans/creditscores.phtml

This site seems to contradict the "multiple inquiries about private student loans won't hurt your FICO score" line of thinking.



The part you quote seems to be talking about private student loans specifically. Or am I misreading it?

RF

You're reading it correctly. Isn't anything that is not a Stafford or GradPLUS loan considered to be a private student loan?
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New post 18 May 2009, 16:05
this is great info..

I think that Prime - 0.5% option seems best..
VP
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New post 18 May 2009, 17:02
msday wrote:
refurb wrote:
The part you quote seems to be talking about private student loans specifically. Or am I misreading it?

RF

You're reading it correctly. Isn't anything that is not a Stafford or GradPLUS loan considered to be a private student loan?


Oh I see, I didn't know we were talking about private loans specifically.

They do credit checks for GradPlus loans, but I guess those don't affect your credit score?

RF
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New post 19 May 2009, 04:29
FN wrote:
this is great info..

I think that Prime - 0.5% option seems best..


Yeah I agree, refurb's post that he found at BW shows that it can be a bit tough to get the Prime - 0.5% rate (your co-signer needs an 800+ FICO score?), but if you shop around for relatives (lol), you may be able to get there.

I guess I wonder how Discover can get away with such a low rate in comparison to other lenders...maybe because the repayment period is 15 years vs. 20 years? That may be a part of it, but not the complete picture. Any financial gurus willing to venture some educated guesses?
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New post 19 May 2009, 11:46
dayman wrote:
What about hedging and applying for a mix of loans (GradPlus and private)? I thought about this, but haven't spent any time researching the implications yet. Are the private loans limited to the COA generally or is it just based on your credit inquiry?


I was thinking about doing the hedge thing too. The idea would be to borrow say 25% of your total loans privately, then if rates went through the roof, you could pay those off first. Or, you could do most of your private borrowing in your second year, lowering your overall exposure.

The thing is, when you start to do that, you reduce the total benefit you'll get from using private loans. At some point, its not going to be worth all the effort to save $2000 if you're also taking on the risk of rising interest rates.

I'm pretty sure you can't borrow above the COA on any loans, at least not without withholding info from the lender.

I also agree with jb32 that the risk of rapidly rising interest rates is probably higher now than any time in the last twenty years. I'm going to stick with Stafford and GradPlus and try and pay off the higher interest rate loans ASAP after graduation. In the end, the added cost will be worth the lower risk.

RF
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New post 19 May 2009, 13:41
Actually, my assumptions about the prime rate might be too low! Only the last year of scenario 4 and the last two years of scenario 5 have the prime rate above 10.

If you look at this chart, the prime rate has been a lot closer to 10 even in the past few years!

Image

Rf
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New post 04 Jun 2009, 18:44
I found this over at the bw forums...

Quote:
I was originally having a hard deciding between the Grad PLUS and the alternative loan but after having giving a couple of lenders my credit score (766) I found out that the alternative loan isn't as attractive. I thought that I would be able to qualify for the better rates, i.e. Prime + 1%, however my score puts me in the Prime +5%. That by itself is already as much as the Grad plus rate and it would most likely go up. They told me that one would need a fico score of around 820 in order to get near the Prime +1% rate.


Also, I called my loan provider because I hadn't heard anything back after applying and she said they are waiting for my school to certify the loan. She said a lot of school are waiting until July because the gov't will be setting the new interest rates early that month.

Maybe we'll luck out and see the 8.5% Grad plus drop a bit?

RF
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New post 05 Jun 2009, 11:12
Anybody know if you can cancel your loan and change to the lower interest rate in July if it does go down? I figure it won't be an issue, but maybe I am overlooking something.
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New post 05 Jun 2009, 12:22
One other thing to note this week is the big change in the Eurodollar futures contracts, which is tied to LIBOR expectations. For instance, from Wednesday to today, Eurodollar contracts scheduled for December 2010 delivery fell 50 bps, which implies expectations for future LIBOR rose 50 bps in just 3 days. With movements like that it wouldn't take much for variable (i.e. private) student loan rates to rise higher than fixed rate student loans.
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New post 05 Jun 2009, 13:21
dayman wrote:
Anybody know if you can cancel your loan and change to the lower interest rate in July if it does go down? I figure it won't be an issue, but maybe I am overlooking something.


I don't see why not. I mean, the funds haven't been disbursed yet, so you could just opt to not disburse any funds, then apply for a new loan.

Then again, I've never tried it, so there might be a factor I'm overlooking.

RF
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New post 15 Feb 2010, 23:51
Bump. With admittances rolling in, I'm interested to hear about what you guys are thinking in terms of loans. Especially considering Grad PLUS vs. private.

From a little bit of research so far it seems like a private loan at LIBOR +4% might be a better, although riskier, deal than Grad Plus at 7.9% plus 2.5% origination.

Thoughts? What are others planning?

Thanks,
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New post 03 Mar 2010, 07:23
Another thing to consider is taking out loans against your 401k. I think you can typically borrow against half of your balance, so it may or may not cover all your tuition (but every little bit helps). Looking at mine, the rate was 3.25%, so it's definitely something to think about. The catch is that the payback period is shorter term (3-58 months). Anyway, just something to consider.
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New post 04 Mar 2010, 06:47
Good call, Jerz. Guess that wouldn't make much sense at all. I'll have to check and see if they offer the option to defer, even if it's at a higher rate.
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New post 30 Mar 2010, 07:31
This has become a terrifying endeavor...
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New post 22 Apr 2010, 04:23
Hi All,

I presume these schemes are only applicable to US students. Are there any financing options available for non US citizens wishing to pursue a MBA program in the US?
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New post 30 Apr 2010, 11:01
There are two downsides to borrowing against your 401k

1) No grace period
2) Returns are limited since a good portion is tied up in your loan.

The benefits are good though:
1) Low fixed rate (4.25% at my company)
2) Flexible payment options (1-10 years usually)
3) The interest you pay goes to YOURSELF (or specifically your 401k)
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New post 13 May 2010, 21:24
Does anyone have an idea what credit score it takes to qualify for the best rates from private lenders? I was surprised to find out that I "qualified" for the worst rate 7.75 + LIBOR from Discover Financial. My credit score is in the 80th percentile.
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New post 14 May 2010, 06:56
That's not entirely surprising. First, it's an unsecured loan so banks are going to save the best rates for people with sterling credit scores (but of course they'll advertise the heck out of those rates). Second, the govt did away with subsidies for private education lenders, so of course banks will raise rates to compensate for the lost subsidies.
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New post 14 May 2010, 13:40
magus wrote:
There are two downsides to borrowing against your 401k

1) No grace period
2) Returns are limited since a good portion is tied up in your loan.

The benefits are good though:
1) Low fixed rate (4.25% at my company)
2) Flexible payment options (1-10 years usually)
3) The interest you pay goes to YOURSELF (or specifically your 401k)


I don't think you can borrow if you quit. At least for my company any loans on your 401K needs to be repaid immediately upon termination of employoment. Otherwise it will be considered a withdrawl and taxed/penalized accordingly.
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New post 01 Jun 2010, 13:19
Trying to understand the mechanics of loans a little better.
1) If you apply for a private loan, do you forgo Federal Plus in its entirety? So you can't do 20K in private and the rest in Federal, right?
2) I heard your credit score temporarily deteriorates every time there is a credit check request done on your profile. So how do you shop around for a loan? Or does student loan check not impact your credit score?
3) Is it always better to have a co-signer? Even if you think your credit score is somewhat good?

Thanks!
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Re: Financing Your MBA   [#permalink] 01 Jun 2010, 13:19

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